Maybe Michael Arrington of TechCrunch really did stumble into a conspiracy of “collusion and price-fixing”, with Silicon Valley super-angels conspiring in SF’s trendy Bin 38 to fend of the threat of Y-Combinator, drive down valuations, and push VCs out of the picture. Then again maybe he’s just stirring things up prior to next week’s TechCrunch Disrupt VC/Super-angel smackdown.

Yeah really. Mathew Ingram’s got a roundup on GigaOmquoting Chris, Dave, Bryce, Fred, Ryan, Andrew, and Mark. Techmeme’s got links to most of them as well as Henry, Marc, Chris, Mathew, Ashkan, Alex, Alan, Stowe, Dean and Mark — see the comments for a screenshot. And On Google, I found links to Patricio, John, Mike, Chris, Ben, Dan, and Gautham … hey wait a second, I’m noticing a pattern here.
The valley boys are hanging out on Quora, too (along with a few women), speculating on the identity of the so-called “super angels”. Likely suspects include Ron, Brian, Dave, Jeff, Mike, Aydin, Steve, Bryce, and Sundeep (who tweeted from the “secret” meeting). Bryce joins in the comments on Quora, where he’s joined by Danny, Henry, Ben, and several anonymous users — one of whom comments that Keith, Joshua, Jason, and Thomas have all denied being that the meeting.* The Hacker News discussion’s good too, although no reaction to the Y Combinator angle.

On A VC,Fred Wilson makes some good points about the increased likelihood of investor collusion in an angel environment. Of course as Marc Canter points out in I’m Shocked, I tell You, Shocked!, Fred does deals with all these guys, so it’s scarcely surprising he doesn’t see it as collusion,** but it’s still worth listening to his conclusion:

The very fact that some of the most active and respected angels in silicon valley were meeting to discuss the changing dynamic of their business suggests to me that the opposite is happening. I suspect that the good old days when they could all get together and do a deal are gone. And they are not happy about what they see happening to their market.

Indeed. In fact I think there are three different things going on here. The most obvious the continued trend towards more funding options, especially on the low end: including Kickstarter as well as incubators like Y Combinator. Diaspora has to be one of the hottest angel-size startups right now, and they raised $150K without having to go to angels. This pushes angels to larger and later deals and into more collisions with VCs, so they need to adapt.

Geography is another important dimension of what’s happening. Angel investors as well as VCs have traditionally had very strong local networks — which has been great for Silicon Valley investors, because theirs has been the most valuable network. Now other credible tech hubs have emerged in the US (New York, Boulder, Seattle, Boston …) and internationally with enough startup infrastructure and valuable networks in their own right. Especially with the state of California in such a mess, Silicon Valley’s advantages are rapidly decreasing.

And as if that’s not enough …

The valley boys may not see it as discrimination, but the overwhelmingly male VC and angel community has given most of the money and attention and power to guys like themselves, many of whom go on to become the next generation of VCs, angels, and journalists. Now women are unlocking the clubhouse as everybody realizes, d’oh, that’s the majority of the population who spend most of the money and have better results as CEOs. Patterns for successful angel and VC investment need to change, and it’s particularly a challenge for groups whose networks are overwhelmingly male. Y Combinator’s 92%-male investments may not be a threat here, but they’re notthe onlygame in town.

So yes, there’s a lot of pressure on the Silicon Valley angels, and it’s not surprising for them to meet privately without any press when their interests are under threat. Since so many of them are friends and colleagues it’s scarcely surprising that they’d get together and talk about it over dinner Some people may have crossed the line and done something illegal, and if so hopefully they’ll be caught. Other kinds of collusion are as old as the hills, legal, and unlikely to go away.**

Still, what a great lead-in to TechCrunch Disrupt! As well as a Super Angel vs. VC smackdown with several of these guys, there are also fireside chats with several male investors and an all-woman panel on women in technology.

This year’s theme is “the third wave,” which I think will make a great lens to look at the conference. Stay tuned for more …

Originally titled “Collusion is such an ugly word”, an obscure reference to an old Firesign Theater routine. So it’s fishpaste, is it? The revised title is from a tweet by Sasha Pasulka, aka evilbeet, author of Too Few Women in Tech? Stop Telling People How They Should Feel About It, and used with permission. Thanks, Sasha! Thanks also to Kara for the decoding and further discussion on Twitter, and to Stephanie for the timely reminder

Posted by jon on Wednesday, September 22nd, 2010, at 9:00 am, and filed under Professional.

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Comments

Building on Julie’s comment: it sure looks to me like a clique of guys writing about and linking to other guys and advancing each others’ interests while covering a “conflict” that they’ve ginned up to get press.

Venture-capital investors and others have been bidding up the valuations of consumer Web start-ups this year, particularly of the firms that show the most user traction. In an echo of the 1990s dot-com boom, some investors also are giving lofty valuations to Web firms that have no revenue and that barely have a product out.

Among them: question-and-answer website Quora Inc. in March raised around $14 million in a financing round that inputs a value for the whole company of about $87.5 million, people familiar with the matter have said. The Palo Alto, Calif., firm didn’t publicly launch its service until June and hasn’t said how it will make money.

Hmm, dunno, maybe the discussions went something liket his:

Quora guys: we used to work at Facebook so we know how to make great software and we’ll have an all-blue user interface.

funders: great!

Quora guys: we’ll still haven’t figured out the business model but one of us used to do data mining and ad targeting at Facebook so we’ll have no problem ‘monetizing’ them.

funders: great!

Quora guys: and our go-to-market plan is great:

1. get the guys we know, including lots of ‘influential’ bloggers, to hang out on the site and bring traffic our way
2. ???
3. profit!

And Felix Salmon has blogged about it too, quoting Henry and Dave and Fred and Ryan and noting that collusion doesn’t have to work to be illegal. The name rang a bell, and eventually I realized he had showed up in Gabe’s and Clay’s nearly-all-male “What are you reading” lists in the Atlantic. Good to see him weigh in here!

Felix’ original post takes Michael’s accusations very seriously. In an update after he discovered that Ron denied being there, though, he sees it as a lot less malign.

Dave tweeted that Ron threw him under the bus. And then MG Siegler had the scoop on Ron’s email: “It’s a bombshell. No, it’s a nuclear bomb. It speaks for itself.” Indeed.

I wish the Angel community could have the same integrity and values of the entrepenuer community, but unfortunately I now believe that is hopeless and your actions prove that….

This is despicable and embarrassing for the tech community in my opinion.

Please keep this confidential even though I know that will be hard since two of you let your egos take over and show Arrington how important you are by telling him you were headed to a “secret” angel gathering.

My love affair with Quora continues. I simply can’t think of another site where so much useful information is being organized so rapidly in one place. You’ve got experts fielding anonymous questions. You’ve got high-profile people answering questions about themselves or their companies. And you’ve got juicy speculation.

The bulk of the article is a screenshot and cut-and-paste of an anonymous poster on Quora claiming that Carol Bartz (who TechCrunch has been attacking roughly forever) is getting fired from Yahoo!

Journalists using anonymous sources to attack their enemies and drive traffic and attention to companies they support …

Mathew starts with Jon’s post from True Ventures (an investor in GigaOm) saying “Founders come first”. As well as Chris, Micah, Dave, Jon, Mike, Ron, and Chris, he also links to a different Dave, a different Chris, Aydin, Paul, Fred, and Clay.

At the risk of sounding like a broken record: this is a good example of the circle-jerk behavior that Julie’s talking about and Shelley Powers describe so memorably years ago in Guys don’t link. A bunch of insider guys are shamelessly promoting each other.

And on top of that, one of the main stresses on angels and VCs is that the pattern of investment, where overwelmingly-male firms primarily give money to guys, is going to have to change. And none of the people writing about Angelgate are talking about it. From a strategy perspective, it reveals a collective blindspot. And from a media perspective, it’s laughable.

It was, according to the federal complaint, the chummiest of secret clubs among Silicon Valley’s corporate elite. The membership rules were simple: Don’t cold-call any of our employees with job offers and we won’t cold-call any of yours.

It’s hard to find anything good in this story, and it’s even harder to find anything good on Techcrunch these days. We’ve been treated to a post by Sarah Lacy blaming teachers’ unions for the “Why Our Schools Suck” and another one saying, “But from where I sit, it never felt much like a recession at all.” We’ve heard from Vivek Wadhwa about “Silicon Valley’s Dark Secret: It’s All About Age,” and Arrington saying “Too Few Women In Tech? Stop Blaming The Men.” There was a strange post from Arrington: “Blogging and Mass Psychomanipulation.” And finally, Arrington posted that “AngelGate won’t take over the TechCrunch Disrupt agenda.”

Great going, Arrington – throw out an allegation of Federal criminal behavior, get two Silicon Valley legends publicly at each other’s throats, post a private email from one and a deleted tweet from the other, threaten to post more private emails and then have the expectation that they’ll be on your stage at your conference bright and early Monday morning all unicorns and rainbows to “talk about how venture capitalists and angel investors can help entrepreneurs succeed.”

Oddly enough, the three are scheduled to take the stage simultaneously Monday morning on a panel discussing venture-capital and angel investors. The conference, as you can undoubtedly guess, is Arrington’s own Techcrunch Disrupt.

It’s so perfectly timed one might even think that HeavensGateInvestiGate AngelGate* might be scripted.

No! Say it ain’t so!

Ryan concludes

even if this is all a setup and the venom isn’t as real as it feels, Monday morning’s panel promises to be full of Silicon Valley drama, and somebody’s Tesla might get keyed.

We’ll be ringside, sipping a latte, blogging on a Macbook and noting for you which contender’s got the best phone

Ah, there’s nothing like a manly hissy fit amongst a passel of white dudes in Silicon Valley to open the fall television viewing season!

Wow! Somebody mentioned gender — and race too!

Kara’s also some great translations of Ron Conway’s first email, including

I was not there, but this does not stop me from completely going all Judge Judy–indicting, trying and convicting you, and despite the fact that one of my own partners was at the faux-controversial dinner.

I do this with a sense of righteous indignation that shall endear me to the entrepreneurs I would so dearly love to steal right out from under you.

Speaking of Ron, Chris Sacca’s long email to him, is now up on TechCrunch. Chris CC’s Josh, Steve, Jeff, Mike, Dave, and David. Michael’s also helpfully provided an index to what he, Ron, and David have said so far.

Meanwhile on Twitter, Julie Lerner (of “organic robotics” fame) and Stephanie Robesky of Grows Up say some very sensible things as well. In fact I’m going to take their advice, wrap up this thread, and get towork on my preview for the Tuesday morning TechCrunch Disrupt panel on women in technology.

Working title: TechCrunch, disrupted: the third wave meets the agenda of awesome.

[…] and shameless plugs with the participants, the main news on TechCrunch this last week has been Angelgate. Kara Swisher of BoomTown nicely characterized it a “manly hissy fit amongst a passel of […]

Diversity didn’t come up on the next panel either, a love-fest with eight guys including Michael. Highlights included blatantly promoting Quora and angel investor Yossi Vardi’s insights that “The difference between a ‘super angel’ and a VC is like making love with a lover versus making love with the government.” Yes, Disrupt really is the kind of a place where an investor says “we will fuck you over” and the crowd is expected to go wild.

The rest of Monday was kinda “meh” until rumors started swirling about a potential acquisition. Sure enough, Tuesday morning AOL bought TechCrunch — signing the contract on stage. The estimates I’ve seen are $25M up front with a three-year earnout that could take it to $40M or $50M, depending on who you believe.

I thought things started off pretty well today at TechCrunch Disrupt with surprise visitor Tim Armstrong, AOL’s CEO.

But the day ended on a perfect, perfect note: MC Hammer, who most definitely still has it, did a full performance at 1015 Folsom in San Francisco. 2,000 people packed in to the club and were immediately rewarded with MC Hammer and his dancers doing things that made every single person wildly happy. Not one person wasn’t dancing. It was, as I occasionally say, awesomeness in a bottle.

Hammer’s on a roll right now, and it’s great to see him get a gig like this. As Zennie Abraham brings up in TechCrunch Disrupt SF Women In Tech Panel: @digitalsista’s view, he could have been a good choice as a conference speaker. Imagine a panel with him, Leila C. Janah of SamaSource (who instead was dragged into the women in technology panel), and somebody from a community technology center or other non-profit joining Peter Thiel to talk about Peter’s plan to pay students to “stop out” of school and other ways the tech startup crowd and their investors could help the Bay Area community. Now that’d be awesome. But I digress …

There was a rumor late last week that the FBI was looking into Michael’s allegations. The timing was remarkably convenient for TechCrunch, and it’d be interesting to find out what influence if any it had on the price. In any case, Angelgate’s helped given a lot of VCs and angel investors to lay out their pro-entrepeneurial philosophies and spotlighted the range of their personalities as well as current alliances. As I said in my original post

Some people may have crossed the line and done something illegal, and if so hopefully they’ll be caught. Other kinds of collusion are as old as the hills, legal, and unlikely to go away.

Or as Rashmi Sinha of Slideshare and Sasha Pasulka of EB Media and Seattle 2.0 said on Twitter.

[…] posts in the series: Fretting, asking, and begging isn’t a plan, Collusion is sooo hot right now, The third wave meets the anatomy of awesome, Changing the ratio, A public service announcement, […]

In fact, the creation of a $20 million investment kitty that Arrington has dubbed CrunchFund is simply the formalization of a long-standing arrangement that has already been going on since he founded his popular tech blog.

That is to say, in which the basic standards of journalism are first warped by calling it newfangled truth-telling and then endlessly corroded by using a wily and unusually aggressive combination of favors and threats to extract, from start-ups and VCs in need of press, both exclusive access and information.

Update, September 7: Or maybe not! Arianna Huffington stepped in things got messy. In TechCrunch, Arrington argued that what was really at stake was “editorial independence”, and demanded that AOL sell TechCrunch back to the original owners. On SF Gate, Jason Lloren reports:

To punctuate his demand, he posted a still from the film “300” showing Spartan warriors with their backs against the wall, shields and swords at the ready to defend their position.

In the end, it looks like Arrington forgot those Spartans, uh, all died in a rain of arrows.

[…] Disrupt conference in San Francisco took place in the aftermath of the the Arrington Kerfuffle and Angelgate, and wound up with AOL acquiring TechCrunch. This year, it’s in the midst of an ugly […]

[…] <span “font-size:30.0pt;=”” font-family:”calibri”,sans-serif;color:… There is an angel conspiracy. It dark, it is devious, and it is far-reaching. The conspirators number amongst them many of the top people in the Valley, including … […]